Roubini: Capitalism must adjust before it self-destructs

There is a risk that if people are unemployed long enough they atrophy, they lose skills, so I think we have not done enough on boosting aggregate demand by using appropriate monetary and fiscal policies or even credit easing.

I think the long-term issues that the tech gurus here all excited about — innovation from IT to energy technology to biotech to new manufacturing technology like robots automation, and so on — the problem with all these great innovations is that they tend to be capital intensive, skill biased, and result in labor savings. We have a structural problem with job creation, so I would think about changing the taxation of labor versus capital, how we invest in better educational systems, vocational schools, and reducing payroll taxes as a way to increase demand for labor. Otherwise you have vicious cycle of little job creation, a rise in the share of profits and GDP, redistributing form those spending to those saving, that further reduces aggregate demand.

So inequality was also a theme. You have here not just the top 1% but the top 0.01%, So between technology, globalization, trade, the winner-take-all superstar effect, inequality is rising. This is not just a "moral" issue but also an issue of too little consumption too little savings that is bad for global growth.

So it becomes vicious cycle. It's a bit like the old Marxist idea that if profits grow too much compared to wages, there's not going to be enough consumption, and capitalism is going to self destruct. So I think that insight of Karl Marx is as useful today as it was 100 years ago.